TOKYO – While Carlos Ghosn is in a tight Japanese prison with the fate of his global auto empire in the dark, two conflicting scenarios are emerging that explain the astonishing upheaval.
The first – the official story publicly written by Hiroto Saikawa, CEO of Nissan Motor Co. – is that Ghosn was simply caught violating the law. Saikawa, the brushed-up manager who had been Ghosn's loyal understudy for almost two decades, carried out his fiduciary responsibility by reporting the case to prosecutors and having Ghosn removed as Nissan's chairman.
The second scenario is not cut and dried.
It is a conspiracy theory that wins currency among former Nissan staff and observers. And it paints a different picture of Saikawa, Ghosn and the Renault-Nissan Mitsubishi Alliance, which Ghosn sowed and cultivated about two decades ago to become the world's largest car group.
In that alternative scenario, Ghosn, 64, has or has not violated Japanese law. At the time of the press he had to be officially charged and the details of his alleged crime were not made public. But Saikawa, 65 and facing his own pension horizon, seized Ghosn's arrest on November 19 to reject the iron boss and possibly take control of the Japanese car manufacturer from his top shareholder, Renault from France, according to speculation.
While Ghosn enters his third week in Japan, the truth of the matter is still unfolding.
Ghosn has now stepped down as chairman of Nissan and Mitsubishi, two of the three car manufacturers he is acclaimed to merge into the alliance between Renault and Nissan-Mitsubishi. The future of the group is becoming increasingly turbid, despite new efforts to present a unified façade during an alliance meeting in Amsterdam last week.
Ghosn is accused of attempting to hide about $ 80 million in compensation. It was unclear last week whether his alleged actions were technically incorrect.
The reaction to his sudden demise brought with it a weak dismay.
"I was shocked, I just could not believe it", said Osamu Masuko, CEO of Mitsubishi last week, shortly after his board of directors followed Nissan in removing Ghosn as chairman.
"I still do not understand why," Masuko said.
But half a world away in France, the story takes a different tenor. Among the screaming headlines of that country they asked: "Is the Ghosn affair a coup that Nissan propagated?" Asked another: "Carlos Ghosn in prison: scandal or conspiracy?" And a third: "Carlos Ghosn: Is the theory of a conspiracy credible?"
Even in the United States, the editors of The Wall Street Journal accused the state of Ghosn as an & # 39; inquisition & # 39 ;.
Saikawa denies that the actions were part of a boardroom coupon.
When he was asked a few hours after Ghosn's arrest, Saikawa replied: "That's not how we see it."
Others remain skeptical.
"I do not accept that this was a coincidence," says Christopher Richter, senior auto analyst at CLSA Asia Pacific Markets. "This was a situation that Saikawa and Nissan found very useful: the stars were aligned and the moment was right to attack, and there you have it."
The detention center of Tokyo
& # 39; Ghosn Shock & # 39;
The arrest of Ghosn in Tokyo took place against a background of growing mistrust between Nissan and Renault. Renault owns a controlling 43.4 percent of Nissan, but Renault's largest shareholder, the French government, has put Renault under pressure to finalize an "irreversible" partnership between the two companies. Not long after the French authorities ordered Ghosn to do this, a Nissan whistleblower reported Ghosn's alleged misconduct and Japanese law enforcement resurfaced.
The resulting & # 39; Ghosn Shock & # 39 ;, as it is called in the Japanese media, is shrouded in mystery. And like any good conspiracy theory, a statement raises new questions.
An example: if Ghosn had indeed reported damages of ¥ 9 billion ($ 80 million) eight years ago from 2009, why did it only come out this year?
Some wonder how that big discrepancy could go unnoticed, since Nissan Motor Co. one of the bluest Japanese blue chips. It is run by some of the world's largest business brains and is being screened by an army of auditors.
Another question from some observers: why is Nissan no longer public with details of Ghosn's alleged crimes? Even Masuko admitted that the management of Mitsubishi Ghosn simply resigned as chairman, although the directors appointed by the Nissan administration gave little details about the lawsuit against him.
The balloon scandal comes on the heels of the changing of the guard in 2017 when Ghosn handed over the reins of the CEO to Saikawa. According to several accounts of current and former executives and managers of Nissan, Saikawa has used his new power to determine his own course for Nissan and to safeguard his independence.
A possible factor is also the friction between Renault and Nissan, exacerbated by the French government. In 2015, the French government created a power game to increase control over Renault. By extension, that would have strengthened the influence of France on the Japanese car manufacturer.
Such a movement found immediate resistance at Nissan, which has become larger and richer since the financially difficult days of 1999 when Renault gained control.
"I do not think anyone at Renault has fully appreciated the deep-rooted resentment on the Japanese side," said an Nissan insider. "Has the alliance rearranged the purpose of the investigation?"
Another possible explanation for the surprise movement against Ghosn: this year Japan for the first time adopted a system for negotiating criminal pleas. The new prosecution tool could have provided the perfect cover for someone to air the dirty laundry of Nissan. And the notoriously diligent public prosecutors in Tokyo were pleased that Ghosn was a shining example of the new rules in action.
The details of the case against the globally recognized Ghosn are still not clear. Nissan director Greg Kelly – a human resources manager at Nissan, an American lawyer and Ghosn's old right-hand man – was also arrested on November 19 and accused by Saikawa as the mastermind & # 39; of the program.
According to a person familiar with the case, Ghosn and Kelly are accused of executing a plan to divide Ghosn's total annual allowance into two. One part would be publicly reported as required for financial files. The other would be postponed for payment to Ghosn on retirement.
The probe claims that Ghosn started to do this in order to avoid the unflattering public control of his excessive salary in Japan, where managers take home a relatively modest salary. Prosecutors say that Ghosn and Kelly implemented the deferred payment in 2009, the year in which a new Japanese law began requiring companies to declare the remuneration for an individual executive of a total of ¥ 100 million or more – about $ 880,000. person who was familiar with the issue.
The probe claims that Ghosn has postponed half of its annual compensation package for future determinations since 2009. By March 2018, that deferred compensation from Nissan was approximately $ 80 million.
Ghosn would have earned about $ 22 million in the last fiscal year of Nissan, but reported only about $ 6.5 million. The then new CEO Saikawa, on the other hand, received ¥ 499 million, or about $ 4.39 million, for the year. And that was Saikawa's self-imposed pay cut, which he took to pay for the last inspection scandal of the company in Japan, an unrelated matter.
Prosecutors and Nissan now say that the problem with Ghosn's methods is that even his deferred compensation amount should have been reported by the company as future liability.
The argument of the upcoming defense, according to Japanese media reports, is that Ghosn and Kelly did not deliberately conceal compensation while they knew this had to be reported. One counter argument states that the fee did not have to be reported because the exact amount was still undetermined and because it had not yet been paid out.
Nissan's corporate governance policy enables the chairman to determine the remuneration of each director of the board of directors, including his own. For some people, that raises so many red flags about Nissan's corporate governance as about Ghosn and Kelly. According to a Reuters report referring to a public limited company, Nissan's corporate auditors, Ernst & Young ShinNihon, repeatedly asked suspicious transactions related to the case, only to hear from Nissan that nothing was wrong.
"The company is responsible for the transparency of the process," said Takaki Nakanishi, CEO of Nakanishi Research Institute in Tokyo. "They have to clarify their governance issues."
Ghosn is also accused of channeling money from Nissan to homes and apartments around the world with help from Kelly – in Tokyo, Paris, Amsterdam, Rio de Janeiro and Beirut – for his personal use. Nissan claims that Ghosn also had the company pay his sister for an advisory job of $ 100,000 per year.
Since both men are still in prison, neither Ghosn nor Kelly has made a public statement.
Kelly's lawyer, Yoichi Kitamura, said his client denies the accusations.
The office of Ghosn & # 39; s lawyer in Japan, Motonaru Ohtsuru, declined to comment. Japanese media have reported that Ghosn maintains his innocence to prosecutors.
Ghosn has hired an elite defense team. Ohtsuru is a former prosecutor who is famous for being some of the biggest names of Japan Inc. in corporate corruption. This includes Takafumi Horie, a high-profile Internet entrepreneur who spent more than two years in prison for securities fraud. Ghosn will count on the inside knowledge of Ohtsuru & # 39; s knowledge of the hermetic legal system in Japan. Ghosn has also reportedly tapped into the American law firm Paul, Weiss, Rifkind, Wharton & Garrison.
Tired of & # 39; regime & # 39;
In the background, the dormant drama between Nissan and Renault threatens.
The first turning point came in 2015, when the French government increased its controlling stake of 15 per cent in Renault to obtain double voting rights for its two directors in the car commission.
Nevertheless, Ghosn brought the two companies into a new phase of convergence. Nissan and Renault had long shared purchasing and production functions. Ghosn's new guideline was to find more common ground in the areas of engineering, product development and leadership leadership.
This has given rise to concerns about losing influence or independence from both parties, in France and Japan. Saikawa reportedly forced Renault to agree not to interfere with Nissan's business affairs.
Last year the alliance struck a new trip wire.
Ghosn started working on the mandatory retirement age of 65 at Renault. With the agreement of the French government, the Renault Board of Directors agreed to appoint him to a new term of four years as CEO until 2022. But there was a catch. The appointment was reportedly dependent on cementing the alliance in a way that is "irreversible" after Ghosn eventually disappears from the scene.
Some analysts are of the opinion that an agreement has created the possibility that Renault and Nissan will be directed towards a full traditional merger.
Nissan's internal investigation into Ghosn's remuneration package may have delayed this pressure.
"They were the regime of Ghosn," said a former Nissan chief who was familiar with thinking, who did not want to be recognized. "The Japanese wanted to take back the company."
Last week, Saikawa immediately appealed to Nissan employees at a company-wide address. He reprimanded Ghosn for amassing too much power in an "unequal" position as the CEO of all three car manufacturers, according to people attending the City Council meeting.
"The overall tone is pretty hard," said a technician who saw Saikawa on video. "I am not surprised at his tone and portrait of Ghosn as this dictator who has led Nissan astray, and it is clear from his message that he wants to rebalance the alliance structure."
Naoto Okamura and Peter Sigal contributed to this report.